1. finance
2. accounting and auditing

Western Australian
Auditor General’s Report
Audit Results Report
Annual 2014 Financial Audits
— Universities and state training providers
— Other audits completed since 4 November 2014
Report 7: May 2015
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Western Australia
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ISSN 2200-1913 (Print)
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WESTERN AUSTRALIAN AUDITOR GENERAL’S REPORT
Audit Results Report
Annual 2014 Financial Audits
— Universities and state training providers
— Other audits completed since 4 November 2014
Report 7
May 2015
THE PRESIDENT
LEGISLATIVE COUNCIL
THE SPEAKER
LEGISLATIVE ASSEMBLY
AUDIT RESULTS REPORT – ANNUAL 2014 FINANCIAL AUDITS
This report under section 24 of the Auditor General Act 2006 covers financial audits completed
since 4 November 2014 and includes:
 opinions and results of audits on controls, financial statements and key performance
indicators of the four universities and 11 state training providers for the year-ended
31 December 2014
 opinions and results of audits of six university subsidiaries
 student enrolment and funding information, key financial indicators commonly used to
analyse financial health, and graduate survey results for the tertiary education sector
 other audit opinions issued, including statutory authorities, cemetery boards and request
audits
 audit certifications of financial and statistical information produced by agencies to discharge
conditions of Commonwealth funding, grants and other legislation and Royalties for Regions
program agreements.
This finalises my reporting on the 2014 audit cycle.
I wish to acknowledge the cooperation of the staff at the agencies involved in this report.
COLIN MURPHY
AUDITOR GENERAL
6 May 2015
Contents
Auditor General’s Overview ........................................................................................ 4
Executive Summary .................................................................................................... 5
Key Findings ................................................................................................................ 5
Recommendations ....................................................................................................... 6
Audit opinions for universities, state training providers and others ............................. 7
Audit opinions for universities and state training providers ........................................... 7
Other audit opinions and certifications .......................................................................... 8
Qualified opinions ......................................................................................................... 9
Audit certifications ........................................................................................................ 9
Management issues at universities and state training providers ............................... 10
Financial control and reporting issues .........................................................................10
Excessive leave liabilities ............................................................................................11
Information system control issues ...............................................................................13
Timeliness and quality of financial reporting ................................................................14
Best practice for annual financial reporting and controls ..............................................14
Funding and student enrolments at state training providers and universities ........... 15
State training providers’ funding and student enrolments ............................................15
Universities’ student enrolments and income...............................................................16
Financial performance and student information for universities and state training
providers ................................................................................................................... 17
Universities’ financial performance ..............................................................................17
Financial results of state training providers ..................................................................20
Graduate survey results ..............................................................................................22
Appendix 1 – Other audit opinions issued since 4 November 2014.......................... 24
Appendix 2 – Certifications issued since 4 November 2014, including Royalties for
Regions .................................................................................................................... 25
Appendix 3 – State training providers’ student enrolments ....................................... 27
Glossary ................................................................................................................... 28
Alphabetical Index .................................................................................................... 29
Audit Results Report | 3
Auditor General’s Overview
This report summarises the results of the annual audits of public
universities, their subsidiaries and the state training providers for the
year-ended 31 December 2014, and various other audits, and completes
my reporting on the 2014 annual audit cycle.
All universities and state training providers received clear audit opinions on
their financial statements, controls and key performance indicators. A
similar number of financial and information system control weaknesses
were reported to management in 2014, although the number of unresolved issues from the
previous year increased. We also reviewed the annual and long service leave liabilities of the
tertiary education sector and highlighted that universities need to continue to manage this
liability.
Overall the institutions were less prepared for audit this year, with fewer achieving our best
practice status for good financial controls and reporting practices.
In this report we have continued to expand our reporting of selected financial indicators and
key performance information for universities and state training providers. This includes a
summary of the impact of a revised funding approach for state training providers. Some of this
information has already been reported in individual annual reports. However, I hope that
inclusion of this information in a single report will provide Parliament with useful overall
information for its monitoring of tertiary education sector performance.
4 | Western Australian Auditor General
Executive Summary
This Audit Results Report contains the findings primarily from the annual financial audits of
universities and state training providers that have a 31 December 2014 reporting date.
In 2014 the public tertiary education sector comprised four universities and four metropolitan
and seven regional state training providers. Total revenue of this sector in 2014 was $3.2 billion
(universities $2.6 billion and state training providers $603 million), including Commonwealth
and State funding. The universities have combined assets of $5.8 billion and state training
providers have assets valued at $1.3 billion.
To ensure timely and accurate financial reports for this sector, it is important that management
keeps proper accounts and records. There should be an effective internal control system to
alert management to irregularities in computer and manual procedures, and help them to
prevent, detect and investigate errors and fraud.
The Auditor General Act 2006 (AG Act) requires the Auditor General to annually audit the
financial statements, controls and key performance indicators (KPIs) of universities and state
training providers. A clear audit opinion indicates satisfactory controls and that the financial
statements are complete, accurate, comply with relevant legislation and applicable accounting
standards and fairly represent performance during the year and the financial position at
year-end.
This report, along with the Audit Results Report – Annual 2013-14 Financial Audits (Report 18,
November 2014), finalises the 2014 financial audit cycle.
Key Findings
Audit Opinions
 Clear audit opinions were issued:
o on financial statements, controls and key performance indicators (KPIs) of the four public
universities and the 11 state training providers
o on the financial statements of six university subsidiaries
o for a range of other smaller agencies
o for 22 certifications.
(Refer to page 7 and Appendices 1 and 2)

The Anzac Day Trust received a qualified opinion on its financial statements as there was
not enough evidence to determine whether an amount of $15 000 paid to the Trust met the
requirements of section 7 of the Anzac Day Act 1960.
(Refer to page 9)

The Legal Contribution Trust received a clear opinion for the six month period ended
31 December 2014. Qualified opinions were issued for the prior six month periods dating
back to January 2010, due to control weaknesses related to interest revenue earned on
solicitors’ trust accounts. These weaknesses are now addressed.
(Refer to page 9)
Management Issues

72 financial and management control weaknesses were reported to universities and state
training providers, up from 66 last year.
(Refer to page 10)

97 information system control issues were identified. Over half of these were unresolved
issues from previous audits.
(Refer to page 13)
Audit Results Report | 5

Universities’ annual and long service leave liabilities continue to grow and now sit at
$255 million – a 22 per cent increase in three years.
(Refer to page 11)
Financial Performance

The state’s four public universities and 11 state training providers were, for the most part,
a low to medium risk in 2014 when measured against selected key financial performance
indicators.
(Refer to page 17)
Recommendations
Universities, state training providers and other agencies should ensure that financial
management, KPI and information systems control issues brought to their attention
during their audit are addressed in a timely manner to ensure the continuing integrity
of their financial control environment.
(Refer to page 13)
6 | Western Australian Auditor General
Audit opinions for
providers and others
universities,
state
training
 Clear audit opinions on financial statements, controls and KPIs were issued to the
four public universities and the 11 state training providers and on the financial
statements of six university subsidiaries for the year-ended 31 December 2014.
 Nine audit opinions were issued to a range of other agencies and a further
22 certifications have also been issued.
 The Anzac Day Trust received a qualified opinion on its financial statements as there
was insufficient evidence to determine whether an amount of $15 000 paid to the
Trust met the requirements of section 7 of the Anzac Day Act 1960.
 The Legal Contribution Trust received a clear opinion for the six months ended
31 December 2014. Qualified opinions were issued for the prior six month periods
dating back to January 2010 due to weaknesses in controls.
Management of the universities and state training providers is responsible for keeping proper
accounts and records to enable the timely and accurate preparation of financial reports. An
effective internal control system should operate to alert management to irregularities in
procedures and assist them to prevent, detect and investigate errors and fraud.
The Auditor General is required to issue an opinion to the responsible Minister for each agency
audited. For universities and state training providers, the opinion relates to:
 financial statements – assurance that the financial statements and supporting notes are
materially complete, accurate, reliable and comply with relevant legislation and applicable
accounting standards
 controls – assurance that the internal control systems and procedures, manual and
computerised, are adequate and ensure that financial transactions comply with legislative
requirements
 key performance indicators (KPIs) – assurance that the KPIs are relevant, appropriate,
based on reliable data and fairly present the performance of the institution in achieving its
desired outcomes.
Audit opinions for universities and state training providers
For the year-ended 31 December 2014, clear audit opinions were issued on the financial
statements, controls and KPIs of all universities, university subsidiaries and state training
providers. Refer to Table 1.
Some university activity is conducted through subsidiary companies. The audit opinions for
these subsidiaries relate to financial statements only as they are not required to submit KPIs.
The financial results of the subsidiaries are included in the consolidated financial statements
of their controlling/parent university. Annual reports of subsidiaries are not required to be tabled
in Parliament.
Audit Results Report | 7
UNIVERSITIES
Opinion on financial statements, controls and KPIs
Opinion Issued
Curtin University of Technology
19/03/2015
Edith Cowan University (ECU)
11/03/2015
Murdoch University
11/03/2015
The University of Western Australia (UWA)
11/03/2015
STATE TRAINING PROVIDERS
Opinion on financial statements, controls and KPIs
Central Institute of Technology
27/02/2015
Challenger Institute of Technology
06/03/2015
CY O’Connor Institute
27/02/2015
Durack Institute of Technology
10/03/2015
Goldfields Institute of Technology
11/03/2015
Great Southern Institute of Technology
11/03/2015
Kimberley Training Institute
04/03/2015
Pilbara Institute
06/03/2015
Polytechnic West
27/02/2015
South West Institute of Technology
25/02/2015
West Coast Institute of Training
05/03/2015
UNIVERSITIES’ SUBSIDIARIES
Opinion on financial statements only
Murdoch University
Innovative Chiropractic Learning Pty Ltd
Murdoch Retirement Services Pty Ltd
Murdoch University Foundation
Murdoch University Veterinary Trust
The University of Western Australia
The University Club of Western Australia Pty Ltd
UWA Accommodation Services Pty Ltd
REQUEST AUDITS
Opinion on financial statements only
The University of Western Australia
Perth USAsia Centre Limited
06/03/2015
06/03/2015
08/04/2015
08/04/2015
30/03/2015
20/03/2015
30/03/2015
Table 1: Audit opinions issued for universities, subsidiaries and state training providers
Other audit opinions and certifications
A further nine opinions for statutory authorities, cemetery boards and a request audit have
been issued since 4 November 2014. Refer to Appendix 1 on page 24. This concludes the
2014 financial audit reporting.
8 | Western Australian Auditor General
Qualified opinions
A qualified opinion alerts readers to inaccuracies or limitations in an agency’s audited financial
statements or KPIs presented in their annual report. Two qualified opinions were issued.
The Anzac Day Trust
– Qualified opinion on financial statements
The Anzac Day Trust received a qualified audit opinion on its financial statements because
there was insufficient evidence to demonstrate that a payment to the Trust met the
requirements of section 7 of the Anzac Day Act 1960.
For sports events held on Anzac Day in Western Australia, the Act requires the body holding
the event to pay the Trust 60 per cent of the net proceeds. To determine the amount due to
the Trust, the body has to provide a return of financial details for the event.
The Australian Football League held a football game on 25 April 2014 and provided a financial
return that did not contain sufficient details. We were therefore unable to determine whether
the revenue of $15 000 received for the event was correct.
Legal Contribution Trust
– Clear opinion for current period but the comparative period information is
qualified
We issued a clear opinion on the financial statements, controls and KPIs for the six months
ended 31 December 2014. However, the qualified opinions on the prior period comparative
information in the financial statements and KPIs is repeated as there was insufficient audit
evidence about these comparative amounts.
The clear opinion for the current period follows qualified opinions dating back to January 2010
arising from control weaknesses related to interest earned on solicitors’ trust bank accounts.
These control weaknesses are now remedied.
The Trust is entitled to receive 51 per cent of all interest earned on solicitors’ trust bank
accounts held with financial institutions in Western Australia. In certain instances the financial
institutions did not remit the correct amount of interest on some solicitors’ trust accounts to the
Trust in prior periods. The improved controls are now considered adequate to ensure that
banks remit interest as required by legislation.
Audit certifications
Throughout the year we conduct audit work to certify financial and statistical information
produced by agencies. This helps agencies to meet conditions of State or Commonwealth
funding, specific grants or legislation so that they can receive ongoing funding or apply for
future funding under existing or new agreements.
Our November 2014 Audit Results Report detailed 202 certifications issued by 3 November
2014, including 173 under the Royalties for Regions program – predominantly for the 30 June
2014 period. A further 13 certifications have now been issued and are reported in Appendix 2
on page 25, along with another nine under the Royalties for Regions program.
Audit Results Report | 9
Management issues at universities and state training
providers
 72 financial and management control weaknesses were reported to universities and
state training providers, up from 66 last year.
 97 information system control issues were identified. Over half were unresolved
issues from previous audits.
 Universities’ annual and long service leave liabilities continue to grow and now sit at
$255 million – a 22 per cent increase in three years.
 One university and three state training providers met our best practice standard for
their good financial controls and reporting practices in 2014.
Financial control and reporting issues
Every institution is responsible for developing and maintaining an internal control system and
procedures to ensure legislative compliance and the accurate recording and reporting of
financial information and KPIs. Internal controls can relate to governance processes, financial
and human resource management and information system procedures. Where internal
controls are weak, it is more likely that errors or fraud may occur and/or not be detected.
The AG Act requires the Auditor General to audit the accounts and to form an opinion on
controls. In forming our opinion, we assess compliance with key aspects of legislation and the
ability of internal control systems and procedures to record and report reliable financial
information and KPIs.
A total of 72 financial and management control weaknesses were reported to management at
universities and state training providers in 2014. The majority (72 per cent) were control
weaknesses of sufficient concern to warrant action being taken as soon as possible. If not
addressed promptly, they may escalate to significant or high risk. Normally these matters
require system or procedural improvements and may be low risk matters from previous audits
that have not been satisfactorily resolved. Thirteen (18 per cent) were unresolved prior year
issues at six of the institutions, a reduction on the previous year.
Figure 1 shows the types of control weaknesses identified from 2011 to 2014.
Financial and management control weaknesses by percentage
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Assets and Expenditure Accounting
Inventory
Procedures
2011
94 issues
KPIs
2012
83 issues
Governance Liabilities Payroll and
Human
Resources
2013
66 issues
Revenue
2014
72 issues
Figure 1: Financial and management control weaknesses for last four years
10 | Western Australian Auditor General
Revenue control weaknesses reported to management included:
 incorrect fees charged or concession eligibility on student fees not routinely checked or
recorded
 student payment arrangements not recorded in a timely manner causing delays in invoicing
and therefore delays in revenue collection
 student enrolment and debtor records amended and refunds processed without
authorisation or review.
Governance weaknesses were reported to ten institutions and included:
 contracts not put in place for arrangements that require a legal contract. This renders the
institution exposed to loss or litigation in the event of disagreement between the parties.
 policies and procedures not documented or updated to ensure consistent administration
and accountability for the institution’s operations.
 risk management policies and registers not prepared as required.
Payroll and human resource control weaknesses included:
 Payroll certification reports not reviewed, signed and returned to the payroll unit by cost
centre managers. In the tertiary education sector lecturing staff are often employed on a
part-time or casual basis. Review of payroll certification reports by faculty or cost centre
managers is an important control to provide assurance that staff are paid correctly for the
hours they have worked. This review is also required to confirm there are no invalid ‘ghost’
persons being paid.
 Written voluntary separation notices to employees at some state training providers did not
represent the required ‘prescribed written notice’. This resulted in employees receiving
payouts in lieu of 20 weeks’ notice rather than a lesser amount. I previously reported this
issue in Report 18, November 2014.
Excessive leave liabilities
Universities and state training providers have significant leave liabilities which require proactive
management. Figure 2 below indicates that overall, state training providers have responded to
Treasury’s advice of the need to actively manage their leave liabilities. The liabilities of state
training providers has declined slightly since 2012.
However, the universities’ leave liabilities have increased by 22 per cent over the past three
years. We have recommended to universities that they do more to manage their leave
liabilities, which increased by 4.1 per cent in 2014. This was greater than the average university
salary increase of 3.6 per cent.
Audit Results Report | 11
Annual and long service leave liability
2014
$255 million
2013
$73 million
$245 million
2012
$74 million
$229 million
2011
$74 million
$209 million
0
$50 million
$68 million
$100 million $150 million $200 million $250 million $300 million $350 million
Universities
State Training Providers
Source: Annual financial statements of universities and state training providers
Figure 2: Combined universities and combined state training providers’ leave liabilities
Large leave liabilities have an adverse effect on an organisation’s net assets position. These
liabilities also need to be closely managed for a number of other reasons. Large balances can
lead to difficulties in raising sufficient cash to pay out balances in the future as and when staff
resign or retire, generally at a higher pay rate than when the entitlement was accrued. It is also
important that staff take regular leave for their health and wellbeing and because fraud can be
more easily concealed by staff who do not take leave.
Challenges that impact upon successful leave management include:
 service delivery pressures
 ad hoc management of leave, including lack of planning.
Factors that help to reduce leave liabilities include:
 close monitoring of leave plans to ensure that staff schedule and take their entitlement of
annual leave each year and extinguish their long service leave within a few years of
entitlement
 policies that encourage staff to take part of their leave as a cash payout or reduce their long
service leave entitlement on a pro rata basis before they accrue their full entitlement.
Recommendations
 Progress of leave liability plans should be reported regularly to the CEO and
senate/council, preferably on a cost centre basis, so that problem areas can be
readily identified.
 Management should facilitate effective succession planning and training so that back
up staff are available when key staff take leave.
 All options to reduce accrued leave should be considered, including a cash payout
if that capacity exists and meets the needs of staff.
12 | Western Australian Auditor General
Information system control issues
Each year we audit the information system (IS) controls at selected universities and state
training providers. The audit determines whether controls are designed, implemented and
operating effectively to provide assurance about the reliable and secure processing of financial
and key performance information. In 2014 we audited IS controls at the four universities, the
four metropolitan state training providers and five of the regional training providers.
We identified 97 information system control weaknesses. Seventy-one per cent were rated as
moderate weaknesses, meaning action should be taken as soon as possible. Another
29 per cent were identified as minor. None of the issues were rated as significant.
Of the issues raised, 55 (57 per cent) were carried over from previous audits. This is an
increase from the previous year when 38 per cent were carried over. However, 2014 saw less
new findings overall mainly because agencies are taking a more holistic and proactive
approach to good practice. The capability maturity assessments completed as part of the
audits have provided insight for this approach. Our annual Information Systems Audit Report
for 2015, which is expected to be tabled in mid-2015, will provide more detail of our IS audit
results.
Security findings accounted for 41 per cent of the findings which include weak passwords,
unauthorised and inappropriate access and system vulnerabilities. Operations findings made
up 42 per cent which include the processing and handling of information, monitoring and
logging user activity, management and review of access privileges.
The distribution of findings are similar to those reported for 2013 with minimal changes across
areas. If not addressed, IS control issues have the potential to compromise the confidentiality,
integrity and availability of computer systems. The distribution of our findings can be seen in
Figure 3.
4%
1%
11%
IS audit findings
42%
IT operations
Risk management
Security
Business continuity
41%
Change management
Physical security
1%
Figure 3: Information systems audit findings in 2014
Recommendation
Universities, state training providers and other agencies should ensure that financial
management, KPI and information system control issues that are brought to their
attention during their audit are addressed in a timely manner to ensure the continuing
integrity of their financial control environment.
Audit Results Report | 13
Timeliness and quality of financial reporting
Preparing financial statements and being ready for audit in a timely manner after year-end
enables agencies to release resources for other important financial management tasks,
thereby improving the overall efficiency and financial management of the sector. Nine
institutions were audit ready earlier than in the previous year.
Our criteria for best practice in financial reporting (see below) consider this timeliness aspect
as well as the quality of the financial statements prepared for audit. The financial statements
prepared for audit were of similar quality to the previous year, with a similar number of errors.
Universities and state training providers use model financial statements1 and guidelines in the
preparation of their financial statements. This assists compliance with statutory requirements
and helps minimise errors. Agencies can further reduce the number of errors through rigorous
internal review that includes completeness, accuracy and quality of the draft financial
statements and supporting working papers.
Best practice for annual financial reporting and controls
One university and three state training providers demonstrated best practice in their financial
controls and reporting in 2014. Refer to Table 2.
Our criteria for achieving best practice status include:
 clear opinions on their financial statements, controls and KPIs
 audit ready early, ideally by 31 January
 good quality financial statements and KPIs, supported by reliable working papers and
submitted for audit within the agreed timeframe
 management resolution of accounting standards and presentation issues (before the audit
process begins)
 key staff available during the audit process
 assessment of the number and significance of control weaknesses identified by our audit.
Universities
State Training Providers
The University of Western Australia
Central Institute of Technology
C Y O’Connor Institute
Kimberley Training Institute
Polytechnic West
Table 2: Best practice for financial controls and 2014 reporting
1


Model financial statements are provided:
for universities by the Australian Government Department of Education and Training
for state training providers by the Western Australian Department of Training and Workforce Development.
14 | Western Australian Auditor General
Funding and student enrolments at state training
providers and universities
 Higher student fees for state training providers resulted in increased student fee
revenue despite a decline in the amount of training delivered.
Government policy changes in post-secondary education in recent years have created
financial challenges for universities and state training providers. The visible impact of these
changes was mainly on student enrolment numbers, the value of fees and charges collected
directly from students and the level of government funding received by the education
institutions. Trends in income and student enrolments for state training providers and
universities over the last four years are summarised in the next two sections.
State training providers’ funding and student enrolments
Funding of Western Australia’s 11 state training providers changed significantly in 2014 as a
result of government policy changes. The main changes were a reduction in the combined
appropriation funding from government and a higher student fee structure.
Commonwealth and State government funding to state training providers is administered
through the Department of Training and Workforce Development. Funding is determined based
on a Delivery and Performance Agreement (Agreement) between the Department and the
state training provider. Each Agreement considers the State’s strategic training needs as well
as the needs of the local community, individuals and the training plans of industry in the
provider’s region.
Between 2013 and 2014 the total State funding to state training providers decreased by
$40.5 million, with the funding under Agreements dropping by $44.5 million or 10.6 per cent,
as shown in Figure 4. Tuition fees collected from students for 2014 increased by $24.1 million,
or 82.2 per cent for the same period.
Appropriation funding* and tuition fees
$450 million
$400 million
$350 million
$300 million
$250 million
$200 million
$150 million
$100 million
$50 million
0
2011
2012
2013
Total Agreement Appropriation Funding
2014
Total Tuition Fees
Source: Audited financial statements of state training providers
Figure 4: State training providers’ appropriation and tuition fee collections
*
Funding under Delivery and Performance Agreements
Audit Results Report | 15
Student curriculum hours is the measure used for student enrolments at state training
providers. As shown in Figure 5, there was a significant decline in the training delivered in 2014
from 28.2 to 25.3 million hours.
Training hours delivered (under Agreements)
30 million
Hours
25 million
20 million
15 million
10 million
5 million
0
2011
2012
2013
2014
Source: Audited KPIs of state training providers
Figure 5: State training providers’ Delivery and Performance Agreement profile hours
for last four years
A table detailing the Agreement profile hours for each state training provider appears in
Appendix 3 on page 27.
Universities’ student enrolments and income
Student enrolments at Western Australia’s four public universities, measured by Equivalent
Full Time Student Load (EFTSL), increased overall by 3.3 per cent over the last four years.
Universities’ total income from continuing operations for the same period increased
6.6 per cent, inflation adjusted. This four year increase in income arose mainly due to an
8.2 per cent increase in Australian Government grants.
Universities' combined student load and income
100 000
$3.0 billion
90 000
$2.5 billion
Student Load
80 000
70 000
$2.0 billion
60 000
50 000
$1.5 billion
40 000
$1.0 billion
30 000
20 000
$500 million
10 000
0
0
2011
2012
Student Load (Full time equivalent)
2013
2014
Income (Inflation adjusted)
Source: Universities’ annual reports
Figure 6: Universities’ combined student load and income from 2011 to 2014
16 | Western Australian Auditor General
Financial performance and student information for
universities and state training providers
 The state’s four public universities and 11 state training providers were for the most
part, a low to medium risk in 2014 when measured against selected key financial
performance indicators.
This section of the report provides a summary of selected key performance indicators and key
financial ratios that are commonly used to analyse financial health. Most of this information
has been reported in each university’s or state training providers’ tabled annual report but is
summarised here for the convenience of Parliament.
2014 — Universities
Liquidity / Current Ratio
All universities rated as low liquidity risk
Diversity of Revenue
Three of the four universities rated as low risk
and one as medium risk
Dependence on International Students
Two of the four universities rated as low risk and
two as medium risk
Operating Results
All universities rated as low risk
Borrowings to Equity Ratio
Three universities rated as low risk and one as
high risk
2014 — State Training Providers
Liquidity / Current Ratio
All state training providers considered low risk
Financial Result
Three state training providers recorded a surplus
Table 3: Summary of selected 2014 financial performance ratios
Universities’ financial performance
The Australian Government Department of Education and Training has a number of
benchmark indicators for assessing the financial performance of universities. These measures
include liquidity, diversity of revenue, ratio of international student fees, operating result and
borrowings to equity ratio. Each university’s performance against these indicators for the four
years ending 31 December 2011 to 2014 is presented below, based on the audited financial
statements.
Liquidity / current ratio
The liquidity or current ratio assesses an entity’s ability to meet their debts as and when they
fall due. It is based on the traditional formula of current assets divided by current liabilities.
The Commonwealth considers a ratio of more than one is low risk. All four universities rated
as low risk in 2014.
Liquidity / Current Ratio
2011
2012
2013
2014
Curtin
1.2
1.4
1.2
1.4
ECU
2.3
2.3
2.7
2.5
Murdoch
1.4
2.1
2.0
2.0
UWA
1.4
1.1
1.4
1.1
Table 4: Liquidity ratio for universities
Audit Results Report | 17
Diversity of revenue – dependence on Australian Government funding
One way universities can reduce their financial risks is by diversifying their revenue sources.
Each university has a different capacity to generate revenue, depending on factors such as
location, size, courses offered, extent of research activity, perceived standing and student
profiles. The Commonwealth considers universities with 55 per cent or less of revenue
received from Australian Government funding represents a low risk and between 55 to
65 per cent to be medium risk. Australian Government financial assistance includes
Commonwealth Grants Scheme and other grants, HECS-HELP payments and FEE-HELP.
Curtin, Murdoch and UWA were considered low risk and ECU continues to be medium risk for
this indicator.
Diversity of Revenue
2011
2012
2013
2014
Curtin
46%
51%
53%
55%
ECU
62%
65%
64%
65%
Murdoch
51%
48%
51%
53%
UWA
56%
52%
51%
55%
Table 5: Diversity of revenue or dependence on Australian Government funding ratio
Dependence on overseas student fees
Some universities diversify their revenue sources by encouraging overseas students to study
their courses. However, it is generally accepted that universities should not be overly
dependent on this source of income. The Commonwealth considers universities with
15 per cent or less of operating revenue from fee-paying overseas students to be low risk and
between 15 and 25 per cent to be medium risk. Based on these criteria, ECU and UWA
continue to be considered low risk while Curtin and Murdoch were considered medium risk for
this indicator.
Overseas Student Fees Ratio
2011
2012
2013
2014
Curtin
25%
23%
19%
19%
ECU
16%
15%
14%
15%
Murdoch
14%
13%
16%
17%
UWA
12%
10%
10%
11%
Table 6: Fees from overseas students as a proportion of total operating revenue
Operating result
Universities are not-for-profit organisations but their operating result is a useful measure of
financial performance. Large deficits or a trend of a number of consecutive deficits would
require review and analysis.
All four universities reported a surplus for 2014 but a decline in the ratio of surplus to operating
revenue.
18 | Western Australian Auditor General
Operating Result / Operating Revenue
2011
2012
2013
2014
Curtin
11%
10%
7%
6%
ECU
9%
7%
8%
7%
Murdoch
13%
23%
12%
2%
UWA
6%
11%
13%
9%
Table 7: Operating result as a percentage of total operating revenue
Note: Murdoch received revenue of $49 million from its subsidiary, Murdoch Retirement Services Pty Ltd, in 2012. Without this
revenue the ratio would have been 11 per cent in 2012.
Borrowings to equity ratio
Universities are permitted by their legislation to finance their activities by borrowing. The
Commonwealth considers universities with seven per cent or less of their equity represented
by borrowings to be low risk. Greater than 10 per cent is considered high risk.
ECU’s borrowings increased during 2012 and 2014 and UWA’s increased during 2012 and
2013 to fund building programs. Three universities are considered low risk against this
indicator for 2014.
Borrowings to Equity Ratio
2011
2012
2013
2014
Curtin
2%
2%
2%
2%
ECU
5%
11%
10%
11%
Murdoch
3%
1%
1%
1%
UWA
5%
7%
8%
7%
Table 8: Borrowings to equity ratio
Note: Curtin’s borrowings exclude amounts for the Chemistry Centre (WA) which are offset by lease revenue.
Audit Results Report | 19
Financial results of state training providers
The selected key performance measures for state training providers below were reported or
have been calculated from information presented in each state training provider’s annual
report.
Liquidity / current ratio
The liquidity or current ratio is based on the traditional formula of current assets divided by
current liabilities. This ratio assesses an entity’s ability to meet their debts as and when they
fall due. A ratio of more than one is generally accepted as low risk. All state training providers
had a ratio of more than one.
Liquidity / Current Ratio
2011
2012
2013
2014
Central Institute of Technology
2.4
2.4
2.3
2.1
Challenger Institute of Technology
2.0
1.6
1.4
1.2
CY O’Connor Institute
0.8
0.9
1.3
1.3
Durack Institute of Technology
2.2
2.0
2.1
2.2
Goldfields Institute of Technology
n/a
2.7
3.9
2.6
Great Southern Institute of Technology
1.8
1.8
2.2
2.5
Kimberley Training Institute
0.8
0.7
0.9
1.2
Pilbara Institute
4.7
2.6
2.2
2.2
Polytechnic West
1.0
0.5
0.9
1.1
South West Institute of Technology
1.8
1.9
1.8
1.2
West Coast Institute of Training
3.2
2.7
3.0
2.8
Table 9: Liquidity or current ratio of state training providers
Financial result
A number of factors can determine whether an organisation achieves a surplus financial result.
However, a surplus is generally an indicator that an entity is adequately funded, and has sound
financial management and/or good budgeting. For the year-ended 31 December 2014, only
three state training providers recorded a surplus compared to six the previous year.
Financial Result
Central Institute of Technology
Challenger Institute of Technology
CY O’Connor Institute
Durack Institute of Technology
Goldfields Institute of Technology
Great Southern Institute of Technology
Kimberley Training Institute
Pilbara Institute
20 | Western Australian Auditor General
2011
2012
2013
2014
10 457 374
2 567 717
3 034 054
1 442 890
1 439 013
-3 489 225
-5 653 729
-7 046 020
-2 944 796
-636 960
171 373
-284 072
397 941
-285 802
-754 122
-156 267
n/a
-2 666 489
535 082
139 579
-1 153 288
-780 336
21 499
-213 343
-312 086
-1 694 560
-1 334 134
-477 251
9 420 438
-1 353 480
-3 506 118
-2 587 684
Financial Result
Polytechnic West
2011
2012
2013
2014
-4 875 155
-11 567 281
1 117 518
4 859 533
South West Institute of Technology
55 146
74 980
-2 589 213
-4 608 000
West Coast Institute of Training
33 058
-3 728 009
579 498
-1 625 866
Table 10: Financial results of state training providers
Note: State training providers are not funded for their depreciation expense.
Cost per student curriculum hour
The cost per student curriculum hour is a key financial performance measure. It is calculated
by dividing the total cost of services by the total number of student curriculum hours of training
delivered.
Many factors influence this measure, so this data alone should not be used for comparison
between state training providers. However it provides a high level indication of efficiency.
Factors can include regional location and economic conditions, the relative cost of different
courses offered and student demographics.
Cost per Student Curriculum Hour
2011
2012
2013
2014
Central Institute of Technology *
$11.65
$12.36
$12.27
$12.29
Challenger Institute of Technology *
$13.12
$14.38
$14.40
$14.83
CY O’Connor Institute
$27.11
$24.35
$24.78
$26.13
Durack Institute of Technology
$21.27
$22.84
$22.66
$23.50
n/a
n/a
$25.83
$28.27
Great Southern Institute of Technology
$19.42
$18.64
$19.04
$20.34
Kimberley Training Institute
$36.27
$42.51
$41.07
$41.34
Pilbara Institute
$50.65
$51.04
$57.50
$61.28
Polytechnic West *
$14.14
$15.30
$13.10
$13.34
South West Institute of Technology
$16.50
$17.44
$19.39
$21.06
West Coast Institute of Training *
$13.77
$13.18
$14.18
$15.50
Goldfields Institute of Technology
Table 11: Cost per student curriculum hour for state training providers
* Metropolitan training providers
The four state training providers shown in italics have recorded less than 10 per cent increase
in their costs per student curriculum hour over the four years.
Audit Results Report | 21
Graduate survey results
This section of the report provides a summary of survey results collected by independent
organisations from students studying and/or graduating from either a university or state training
provider. As this information is not consistently reported in tabled annual report of universities
and state training providers, it is summarised here for the convenience of Parliament.
Universities’ graduate survey information
The information in the following tables is based on graduate responses to the annual national
Course Evaluation Questionnaire conducted by Graduate Careers Australia four months after
students complete their courses.
Graduate satisfaction for university students
Table 12 summarises the extent to which domestic and international bachelor and
undergraduate diploma level graduates were satisfied with the quality of their course. The
results at all four universities fell in 2014 compared to the previous year.
Graduate Satisfaction
2011
2012
2013
2014
Curtin
81.1%
83.3%
80.2%
79.8%
ECU
87.4%
85.2%
87.1%
84.8%
Murdoch
82.4%
83.6%
82.0%
81.6%
UWA
83.9%
82.8%
82.4%
79.1%
Source: Unpublished Australian Graduate Survey data from the
Australian Government Department of Education and Training
Table 12: Graduate satisfaction survey results for university graduates in year of survey
Note: For 2014, survey responses of ‘Neither agree nor disagree’ have not been counted as ‘Agree’ as in previous
years. The results for prior years have been adjusted for comparability with the current year.
Graduate destination for university students
The graduate destination survey results in Table 13 show the proportion of domestic bachelor
and undergraduate diploma level graduates not in further full-time study who were in their
desired level of employment as a proportion of those who were in or seeking employment.
Graduates desired level of employment may be either full-time or part-time.
The results show a two year decline in graduates’ ability to achieve their desired level of
employment.
Graduate Destination
2011
2012
2013
2014
Curtin
80.8%
84.1%
79.6%
69.3%
ECU
73.1%
75.5%
73.7%
66.8%
Murdoch
78.4%
79.6%
71.8%
68.5%
UWA
81.5%
82.3%
78.5%
71.1%
Source: Unpublished Australian Graduate Survey data from the
Australian Government Department of Education and Training
Table 13: Graduate destination survey results for university graduates in year of survey
22 | Western Australian Auditor General
State training providers’ student and graduate survey information
Surveys to establish student satisfaction and the proportion that gained employment are key
measures of state training provider performance.
Student satisfaction
The student satisfaction survey for state training providers is administered through the
Department of Training and Workforce Development. The annual survey is used to measure
the quality of the service which is provided by the state training providers.
The student satisfaction rating is based on the number of ‘satisfied’ and ‘very satisfied’
respondents to the survey. Five of the 11 providers had an increase in student satisfaction in
2014.
Student Satisfaction
2012
2013
2014
Central Institute of Technology
83.8%
82.4%
83.3%
Challenger Institute of Technology
86.5%
85.1%
84.9%
CY O’Connor Institute
92.7%
89.1%
88.4%
Durack Institute of Technology
87.6%
87.0%
90.4%
n/a
80.9%
85.8%
89.1%
92.2%
91.8%
87%
91.7%
91.3%
85.1%
90.6%
87.3%
86%
86%
87%
South West Institute of Technology
89.8%
90.0%
88.5%
West Coast Institute of Training
86.2%
87.1%
88.7%
Goldfields Institute of Technology
Great Southern Institute of Technology
Kimberley Training Institute
Pilbara Institute
Polytechnic West
Table 14: Student satisfaction survey results for state training provider students
Graduate achievement and destination ratings
The student outcomes survey of state training provider graduates is conducted on behalf of
the National Centre for Vocational Education Research every two years. The aim of the survey
is to measure vocational education and training graduates’ employment, further study and
other opinions of the training undertaken.
A survey of 2013 graduates was not conducted in 2014 as it was a non-survey year. The
results of the 2014 graduate survey were not available in time for audit and inclusion in this
report.
Audit Results Report | 23
Appendix 1 – Other audit opinions issued since
4 November 2014
31 December 2014 Reporting Date
Opinion Issued
Statutory Authorities
Opinion on financial statements, controls and KPIs
Legal Contribution Trust — for six months ending 31/12/2014
(Qualified opinion on comparative information in financial
statements and KPIs. Refer page 9.)
The Anzac Day Trust
(Qualified opinion on financial statements. Refer page 9.)
30 June 2014 Reporting Date
23/03/2015
16/03/2015
Opinion Issued
Cemetery Boards — Audited under the Cemeteries Act 1986
Financial statements only. There is no statutory deadline for the Boards to submit their financial
statements
Albany Cemetery Board
16/12/2014
Bunbury Cemetery Board
06/11/2014
Chowerup Cemetery Board
23/04/2015
Dwellingup Cemetery Board
Audit in progress
Kalgoorlie-Boulder Cemetery Board
16/12/2014
South Caroling Cemetery Board
Audit in progress
Request Audit
Financial statements only. There is no statutory deadline for submission of financial statements for
audit
South West Cogeneration Joint Venture
Final Audits
Financial statements only
Albany Port Authority (01/07/2014 – 30/09/2014)
Esperance Port Authority (01/07/2014 – 30/09/2014)
24 | Western Australian Auditor General
05/12/2014
Opinion Issued
21/11/2014
19/12/2014
Appendix 2 – Certifications issued since 4 November
2014, including Royalties for Regions
Unless stated, the certifications were for the year-ended 30 June 2014. The statements
prepared by management were confirmed and no adverse reports were issued.
Client
Date
Certification
Issued
Certification Relates to
Black Spot Projects under the Nation Building
Program (National Land Transport) Act 2009
18/12/2014
Interstate Road Transport Act 1985
18/12/2014
Nation Building Program (National Land Transport)
Act 2009
18/12/2014
Department of Local
Government
Local Government (Financial Assistance) Act 1995: 
Commonwealth funding to local government authorities
18/11/2014
Department of the
Premier and Cabinet
Natural Disaster Relief Arrangements (NDRA)
06/02/2015
Department of Transport
Nation Building Program (National Land Transport)
Act 2009 projects:
Commissioner of Main
Roads
Kewdale Intermodal Rail Supply Chain
18/12/2014
18/12/2014
Perth Light Rail Planning Study
Portlink Inland Freight Corridor Concept Plan
18/12/2014
Department of Water
Caring for Our Country: Project implementing the Peel
Harvey WQIP: Filtering the Nutrient Storm
06/11/2014
Electricity Generation and
Retail Corporation
Compliance with Electricity Corporations (Electricity
Generation and Retail Corporation) Regulations 2013 on
Segregation Arrangements
30/01/2015
Public Transport Authority
of Western Australia
Nation Building Program (National Land Transport)
Act 2009 projects:
Grain Freight Re-Sleepering Project
Perth City Link Project
Trial of Low Profile Concrete Sleepers Project
21/11/2014
21/11/2014
21/11/2014
Audit Results Report | 25
Royalties for Regions Certifications
Delivering Agency
Royalties for Regions Approved Projects
Date
Certification
Issued
Carbon Farming – Regional Natural Resource Management
05/11/2014
Gascoyne Foodbowl Initiative
05/11/2014
Pilbara Hinterland Agricultural Development Initiative
05/11/2014
Rangelands Reform Program
05/11/2014
Regional Economic Development Water Opportunities
05/11/2014
State Barrier Fence – Regional Natural Resource
Management
05/11/2014
Water Efficiency – Regional Natural Resource Management
05/11/2014
Peel Development
Commission
Support to Local Groupings of Country Local Governments
2012-13 – Peel DC
08/12/2014
Public Transport
Authority of Western
Australia
Upgrade of ‘Orange’ School Buses in regional Western
Australia for period 18/05/2011 — 30/06/2014
18/12/2014
Department of
Agriculture and Food
26 | Western Australian Auditor General
Appendix 3 – State training providers’ student
enrolments
Delivery and Performance Agreement profile hours of the 11 state training providers for the
last four years are tabulated below.
For more information see the section starting on page 15.
State Training Provider
2011
2012
2013
2014
Central Institute of Technology
7 080 737
6 983 205
6 792 401
6 067 216
Challenger Institute of Technology
5 002 379
4 936 112
5 031 510
4 277 012
621 404
627 058
625 187
595 803
1 209 724
1 214 749
1 227 644
1 289 422
Commenced
July 2012
Not
reported
545 051
533 636
1 061 808
1 142 742
1 134 327
1 068 626
Kimberley Training Institute
703 519
715 685
744 968
742 512
Pilbara Institute
772 939
761 358
680 614
586 575
Polytechnic West
7 314 275
7 295 384
7 273 474
6 529 009
South West Institute of Technology
1 883 991
1 805 164
1 771 900
1 530 250
West Coast Institute of Training
2 331 249
2 302 147
2 340 953
2 114 001
Total DPA profile student
curriculum hours
27 982 025
27 783 604
28 168 029
25 334 062
CY O’Connor Institute
Durack Institute of Technology
Goldfields Institute of Technology
Great Southern Institute of Technology
Source: Audited KPIs of state training providers
Table of State training providers’ Delivery and Performance Agreement student
curriculum hours for last four years
For further information on state training providers, please refer to their individual tabled annual
reports available on their websites or the Parliament of Western Australia website.
Audit Results Report | 27
Glossary
Agency
Term used to describe clients audited by the Auditor General, including
departments, statutory authorities, corporations, subsidiaries, cemetery
boards and request audits.
AG Act
Auditor General Act 2006
Clear opinion
(or unqualified
opinion)
Auditor General’s opinion expressed when an audit concludes that in all
material respects the financial statements and KPIs are presented fairly in
accordance with the enabling legislation of the agency, Australian Accounting
Standards (including Australian Accounting Interpretations) and the
Treasurer’s Instructions.
EFTSL
Equivalent Full Time Student Load – measure of universities’ student
enrolment numbers
Financial
audit
Work performed to enable an opinion to be expressed regarding a report
about financial or performance matters prepared by the party who is
accountable for the financial transactions or the performance summary.
FM Act
Financial Management Act 2006
IS
Information systems, primarily computerised systems
KPI
Key performance indicator — information about service performance or
outcome achievement
Management
letter
Letter to agency management that conveys significant audit findings and
results of the audit. A copy is also sent to the responsible Minister.
Materiality
Magnitude of an omission or misstatement of accounting or performance
information that, in the light of context or circumstances, makes it probable
that the judgement of a reasonable person relying on the information would
have been changed or influenced.
Qualified
opinion
Auditor General’s opinion expressed when an audit identifies that the financial
statements or KPIs are likely to be misleading to users, controls were
inadequate, there was material conflict between applicable financial reporting
frameworks or an unavoidable limitation on audit work.
Significance
Relative importance in the circumstances, in relation to audit objectives, of an
item, event or information, or problem the auditor identifies.
TI
Treasurer’s Instructions – prescribed requirements at a minimum level with
respect to financial administration that have the force of law and must be
observed by public sector agencies under the FM Act.
28 | Western Australian Auditor General
Alphabetical Index
Albany Cemetery Board ................................24
Albany Port Authority .....................................24
Anzac Day Trust, The ................................9, 24
Bunbury Cemetery Board ..............................24
C Y O’Connor Institute ...................................14
Central Institute of Technology .....8, 14, 20, 21,
23, 27
Challenger Institute of Technology .....8, 20, 21,
23, 27
Chowerup Cemetery Board ...........................24
Commissioner of Main Roads .......................25
Curtin University of Technology ...8, 17, 18, 19,
22
CY O’Connor Institute............. 8, 20, 21, 23, 27
Department of Agriculture and Food .............26
Department of Education (Commonwealth) ..14
Department of Industry, Innovation, Climate
Change, Science, Research and Tertiary
Education (Commonwealth) ......................14
Department of Local Government .................25
Department of the Premier and Cabinet ........25
Department of Training and Workforce
Development .............................................14
Department of Transport ...............................25
Department of Water .....................................25
Durack Institute of Technology 8, 20, 21, 23, 27
Dwellingup Cemetery Board ..........................24
Edith Cowan University .......... 8, 17, 18, 19, 22
Electricity Generation and Retail Corporation
...................................................................25
Esperance Port Authority .............................. 24
Goldfields Institute of Technology....... 8, 23, 27
Great Southern Institute of Technology ... 8, 20,
21, 23, 27
Innovative Chiropractic Learning Pty Ltd ........ 8
Kalgoorlie-Boulder Cemetery Board ............. 24
Kimberley Training Institute ... 8, 14, 20, 21, 23,
27
Legal Contribution Trust................................ 24
Murdoch Retirement Services Pty Ltd ............ 8
Murdoch University ................. 8, 17, 18, 19, 22
Murdoch University Foundation ...................... 8
Murdoch University Veterinary Trust .............. 8
Peel Development Commission .................... 26
Perth USAsia Centre Limited .......................... 8
Pilbara Institute ....................... 8, 20, 21, 23, 27
Polytechnic West .............. 8, 14, 20, 21, 23, 27
Public Transport Authority of Western Australia
............................................................ 25, 26
South Caroling Cemetery Board ................... 24
South West Cogeneration Joint Venture ...... 24
South West Institute of Technology ... 8, 20, 21,
23, 27
University Club of Western Australia Pty Ltd .. 8
University of Western Australia .... 8, 14, 17, 18,
19, 22
UWA Accommodation Services Pty Ltd.......... 8
West Coast Institute of Training ... 8, 20, 21, 23,
27
Audit Results Report | 29
Auditor General’s Reports
Report
Number
Reports 2015
Date Tabled
6
Managing and Monitoring Motor Vehicle Usage
29 April 2015
5
Official Public Sector Air Travel
29 April 2015
4
SIHI: District Medical Workforce Investment Program
23 April 2015
3
Asbestos Management in Public Sector Agencies
22 April 2015
2
Main Roads Projects to Address Traffic Congestion
1
Regulation of Real Estate and Settlement Agents
25 March 2015
18 February 2015
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